The study of startup success: What research says about life science entrepreneurism

By David Spellmeyer, Ph.D.

Forty years ago, life science entrepreneurs didn’t have nearly as many resources as they have today. The biotech industry was just blossoming. And for the first time, university researchers were exploring the idea of commercializing their discoveries.

Fortunately for patients in need of new treatments, today is a much different story. Specialized life science venture firms help bring new healthcare innovations to light, and business incubators provide lab space and other business resources to young startups. Universities also have more systems in place to nourish innovation and help startups succeed.

Not surprisingly, today’s robust scientific entrepreneurial ecosystem is also one of scientific study. I enjoy exploring the breadth of research on this topic, and recently came across a number of interesting findings that may be useful to current or future scientific founders. After all, we scientists do tend to base our decisions on evidence presented in publications.

  1. Your network really matters

In the Journal of Business Research, the recent article “University spin-off’s performance: Capabilities and networks of founding teams at creation phase” (Huynh et al., 2017), finds that the entrepreneurial capability of the founding team has the most direct impact on success during the growth phase. This includes the team’s ability to connect with and engage specialized knowledge. Meanwhile, the founders’ networks have an indirect positive effect on company success. That’s not surprising. Founders have the passion for their specialized science. Their chances of success increase if they have a strong network and local ecosystem that they have learned to engage at appropriate times. The ecosystem does not create success itself.

  1. University tech transfer offices can be a boon to success

Recent research in The Academy of Management Perspectives provides an in-depth look at the intricacies of five key intermediaries (university technology transfer offices, physical space providers, professional service providers, networking organizations, and finance providers) and their roles in supporting science startups. The article, “Behind the Scenes: Intermediary Organizations that Facilitate Science Commercialization Through Entrepreneurship” (Clayton et al., 2018), reveals that technology transfer offices are a core component of the university ecosystem for entrepreneurs, providing support in many ways—including intellectual property services. Universities often encourage founders to advance science inside the university to take advantage of the incredible resources available within the university. One benefit is stronger IP when spinning out. In addition, productivity is high when scientists are in a familiar environment. That high productivity can drop dramatically during the transition to a commercial entity.

Many universities also have rich training programs, lectures, courses (for credit) and more. These programs and centers have a significant impact on how scientists learn about commercialization and the steps needed to start an early stage company in the local ecosystem. The exact impact of these resources is less studied because of the variety and number of points of contact. Nevertheless, they are a critical component of the ecosystem, are often affiliated with the tech transfer groups or university innovation centers, and are a great place to start.

  1. Incubators play an essential role

Clayton’s research also reviews the types of physical space available to startups. Often, early firms will co-locate with other firms in incubators, which have grown in number rather substantially. More recent studies have identified “open access incubators” as those which support market development and individual business development. The article also highlights other studies that have shown a positive impact of formal accelerator programs, presumably due to the intense networking and training offered. Interestingly, the presence of an accelerator in the ecosystem might also improve financing for non-participants.

  1. Pick a good location for your business needs

Separate research in the Journal of Business Venturing reviews literature on the factors affecting geographic location of firms founded by academic entrepreneurs (Kolympiris et al., 2015). Not surprisingly, this research finds that the choice is heavily influenced by the access to knowledge assets (e.g., medical centers and professional service providers) and capital resources in local networks. They also find that less experienced entrepreneurs are more likely to locate new firms near their academic institution.

  1. Find a good attorney, connect with a VC firm

One of the most-studied ecosystem intermediaries are the professional service firms that serve many types of ventures. Attorneys are essential to the entrepreneur for many reasons and often have ties to the tech transfer offices, Clayton finds. Their centrality allows them to define the local business norms and serve the ecosystem as business counselors, deal makers, gate keepers, proselytizers and match makers. Many of these providers are accessible and have their own referral networks. Venture capital firms are also well studied. They obviously are important for capital, but they also provide ventures with credibility and access to their own networks with well-established knowledge and service providers. Access to more specialized professional service firms can be incredibly challenging to navigate. This is particularly true as the spin-off is in transition. Established academic networks might not be accessible to the spin-out and might not be sufficient.

  1. Overcoming managerial pain points

In his 2017 thesis, “Advisory Boards in Startups,” Eric Weber surveys a large body of literature that grapples with important issues facing startups. These include the liabilities of newness, adolescence, and smallness. He summarizes the literature on the challenges of taking on new roles and dividing responsibilities amongst the team, and speaks to the importance of establishing the credibility of the organization. In addition, Weber provides his own in-depth study on the importance of advisory boards such as Boards of Directors and Scientific Advisory Boards. Each presents unique challenges and requires non-scientific managerial skills to navigate and grow.

So, how can university-based founders increase their company’s chance of success? With a great deal of focused support before, during, and after the transition from the university setting. ShangPharma Innovation works closely with our academic partners in a founder-centric group that supports and nurtures academic therapeutic breakthroughs and can fill critical investment gaps while providing access to a broad network of professional service firms and specialized knowledge. Success is never a given. But working with a partner who provides access to the right networks and business support certainly increases the chance of success.

Read More
Clayton, P., Feldman, M., and Lowe, N. (2018). Behind the Scenes: Intermediary Organizations that Facilitate Science Commercialization Through Entrepreneurship. The Academy of Management Perspectives 32, 104–124.

Huynh, T., Patton, D., Arias-Aranda, D., and Molina-Fernández, L.M. (2017). University spin-off’s performance: Capabilities and networks of founding teams at creation phase. Journal of Business Research 78, 10–22.

Kolympiris, C., Kalaitzandonakes, N., and Miller, D. (2015). Location choice of academic entrepreneurs: Evidence from the US biotechnology industry. Journal of Business Venturing 30, 227–254.

Stinchcombe, A.L. (1965). Social structure and organizations. In Handbook of Organizations, J.G. March, ed. (Chiacgo: Rand MacNally), pp. 142–193.

Weber, E. (2017). Advisory Boards in Startups (Wiesbaden: Springer Fachmedien Wiesbaden).

David Spellmeyer, Ph.D., is a biotechnology executive with 25 years of broad experience in the life sciences industry. He is an executive-in-residence at ShangPharma Innovation. Read full bio